SPD Passes 9th Circuit Scrutiny in Benefits Denial Case

September 10, 2009 (PLANSPONSOR.com) - An employer's decision to include in the disability chapter of its summary plan description (SPD) a mention of a one-year limit on worker lawsuits over disability benefit denials meets federal benefits law, a court ruled.

The 9 th U.S. Circuit of Appeals rendered that decision in a suit by plaintiffDonna Scharff against Raytheon Co., in which Scharff alleged the lawsuit time limit notation should have been placed in the SPD’s administrative chapter and should have been more conspicuously displayed.

The appellate panel decided that the SPD met the requirements of Employee Retirement Income Security Act’s (ERISA) Section 102 in explaining how a plan participant could be disqualified or ruled benefits ineligible in a way that can be understood. The Raytheon document likewise met the Department of Labor mandate that any potential benefits restrictions not be presented to participants in a way that minimized its importance.

The 9 th Circuit judges decided the employer’s placement of the lawsuit deadline in the disability chapter was reasonable since workers applying for benefits would read that chapter thoroughly. The fact that the lawsuit limit was put amid other terms of a benefits appeal process did not obscure its importance, the court said.

Furthermore, a participant whose claim was denied would examine the SPD’s information about the claims appeal procedure, which lays out the one-year deadline in the disability chapter, the majority added.

The 9 th Circuit judges said federal courts generally should not lightly create additional rights under federal common law because ERISA and its implementing regulations already create a comprehensive scheme to regulate plan administrators’ disclosures.

The case is Scharff v. Raytheon Co. Short Term Disability Plan, 9th Cir., No. 07-55951.